Interview With William Black

Posted: April 26th, 2010 by: h2

William Black, for those of you who don’t follow such things, is the guy who salvaged the Savings and Loan debacle way back there in the 90s.

He’s also the guy who was NOT hired by Obama, which was the exact moment we were told that in fact, yes, accepting campaign contributions from Wall Street does hopelessly compromise your integrity, left or right, makes no difference.

But it’s still good to know there are some reasonably competent and honest individuals out there.

Mr. Black, you are a white-collar criminologist. Can you describe for us these “certain patterns of behaviour, which are relatively standard in criminal financial activity” and explain why they occurred?

The fuller question is why we have recurrent, intensifying crises in so many nations. The principal cause is epidemics of “control fraud.” “Control frauds” are seemingly legitimate entities controlled by persons that use them as a fraud “weapon.” (The person that controls the firm is typically the CEO, so that term is used in this article.) A single control fraud can cause greater losses than all other forms of property crime combined. Neo-classical economic theory, methodology, and praxis is optimizing criminogenic environments that hyper-inflate financial bubbles and produce recurrent, intensifying financial crises. Financial control frauds’ “weapon of choice” is accounting. Neo-classical theory, which dominates law & economics, is criminogenic because it assumes that control fraud cannot exist while recommending legal policies that optimize an industry for control fraud. Its hostility to regulation, endorsement of opaque assets that lack readily verifiable market values, and support for executive compensation that creates perverse incentives to engage in accounting control fraud and optimizes fraudulent CEOs’ ability to convert firm assets to the CEO’s personal benefit have created a nearly perfect crime.
Interview with Bill Black: The Great Global Bank Robbery, Part 1

And make sure not to miss the recent article Spitzer and Black cowrote:

For those who have spent years investigating fraud, it was no surprise to hear that Goldman Sachs, the (self-described) jewel of Wall Street, is the latest firm to emerge from the financial crisis with tarnished reputation. According to a lawsuit brought by the Securities and Exchange Commission, Goldman misrepresented to its customers the quality of the toxic assets underlying a complex financial derivative known as a “synthetic collateralized debt obligation (CDO).”
Spitzer & Black: Questions from the Goldman Scandal

But read this stuff yourselves, these guys are good.

On the slightly more fantasy oriented side, you can read the latest from Herman Daley, Money and the Steady State Economy. If only it were so simple.

Maybe we can start working on steady state economies once we’ve imprisoned the guilty parties on Wall Street, raised the income tax rate back up to a more reasonable 70-90% for top brackets (to avoid the accumulation of capital, which in turn translates to access to political power, which in turns translates to removing regulations that hamper your business, which in turn leads to a full scale economic collapse.

I thought Bernake was supposed to have studied the Great Depression. He must have been dozing off in his classes, or something. Maybe there was a cute grad student seated next to him and he just couldn’t concentrate.

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